The year 2017 was marked by credit market recovery as loans to individuals increased by +6.6%* and corporate credit by +0.9%* at 2017 end, and by a rebound in RON interest rates in September, in a context of rising inflation. The National Bank of Romania made the first steps towards monetary policy normalization by twice narrowing the symmetrical corridor in 2017 and by hiking the monetary policy rate by +0.25 pt., to 2%, in January 2018 and again, to 2.25%, in February 2018.

In this context, BRD’s commercial performance continued to strengthen. The number of active customers increased by 41,000 YoY, of which individuals +38,000 and small business customers +3,000. Individual customers’ equipment rate (the average number of products per active customers) further increased to 4.16 from 4.07 at 2016 end.

The stock of internet and mobile banking contracts for individual customers reached close to 1.4 million, +21% YoY. In particular, the number of MyBRD Mobile subscribers rose by +45%. BRD focused on strongly enhancing MyBRD Mobile application, bringing it to the highest market standards. MyBRD Mobile now features face authentication option for logging in and signing transactions, a value proposition tour before authentication and further improvements in user experience, with increased flexibility in navigation and user interface upgrades.

Net loans increased to RON 30.3 billion, by +5.3%* compared to 2016 end, sustained by robust growth on both individual and large corporate segments. Individuals’ loan production continued to be dynamic, amounting to RON 6.4 billion (+13.8% YoY), and BRD reconfirmed its leadership position on credits to households with a market share of 16.9% at 2017 end.

Non-retail loans inched higher by +0.4%*, with large corporate portfolio posting a positive evolution of +3.1%* YoY. On the SME segment, BRD increasingly co-financed companies under EU and national funded programs, leveraging on the expertise of its dedicated structure. In 2017, BRD financed over 180 investment projects benefitting from EU funds under the 2014-2020 funds absorption program, granting loans of approximately EUR 60 million (of which 90% to the agricultural sector, through the National Rural Development Program). Moreover, it granted approximately 3,000 bridge loans totaling EUR 44 million in the frame of the campaign organized by the Agency for Payments and Intervention in Agriculture (APIA).

Deposits expanded to RON 44.2bn, +3.8%* YoY, pushed up by retail savings (+5.8%* YoY), while non-retail deposits remained quasi stable (+0.5%*) in a context of comfortable liquidity position. Deposits on current accounts further expanded, by +22% compared to 2016 end, in an environment marked by still low interest rates. The ratio of net loans to deposits was 68.6% at Dec 17 end (+1.1 pts versus 2016 end).

Very strong financial results

Net banking income amounted to RON 2,786 million, up by +4.9% YoY when excluding non-recurring items (gains on available for sale assets of RON 131 million in 2016, and RON 9 million in 2017). Net interest income registered a very robust growth of +8.4% YoY, largely generated by solid volume advance, while rising interest rates brought an additional positive contribution in the last quarter of the year. Net fees and commissions income (-1.2% YoY) was adversely impacted by price pressures on transactional banking services, but benefitted from higher revenues from asset management and capital market activities.

Operating expenses reached RON 1,473 million. The program of transformation BRD is embarking on, which will lead to an enhanced quality of service for our clients and increased operational efficiency, resulted in the bank recording an exceptional charge of RON 29 million in Q4-2017, corresponding to transformation costs anticipated over the next three years. Excluding this one off item, operating expenses increased by +4.1% YoY, as a result of rising labor costs and higher IT investments related to change-the-bank-initiatives.

BRD Group further enhanced its operational performance, with gross operating result up +5.9% YoY when adjusting for non-recurring items. Group core Cost/Income ratio reached 52.0% versus 52.4% in 2016.

Loan portfolio quality further improved, as the NPL ratio was reduced to 6.6% at 2017 end versus 10.5% at 2016 end, while the coverage ratio remained solid at 74.2%, compared to 76.6% at 2016 end (all ratios according to EBA methodology). Net cost of risk registered a RON 360 million net release due to recoveries on non-retail customers, recognition of insurance indemnities, and gain on sale of NPL portfolio.

In this context, BRD Group registered very robust profitability. Net profit amounted to RON 1,415 million in 2017, +85.3% YoY, leading to return on equity of 20.1% compared to 11.8% in the previous year.

BRD maintained a comfortable capital adequacy ratio of 19.5% as of 2017 end (including current year result, net of planned dividends**, at individual level, under Basel 3 regulations with national discretions), versus 19.8% at 2016 end (including net profit).

Considering the results of the year as well as the expected capital adequacy trajectory, the Board of Directors has decided to propose a dividend corresponding to a payout ratio of 80% of the bank 2017 core net result and 100% of non-recurring items net of tax, resulting in an overall payout ratio of 83%, subject to a favourable vote by the Annual General Meeting of Shareholders on April 19th, 2018.

“In 2017, BRD produced a very strong financial and commercial performance and obtained promising results in its customer experience optimization process, through upgraded digital channels and a better quality of service. On the medium term, we shall put all our efforts in increasing customer experience quality and satisfaction by accelerating investments in digitalization and further refining our business model. In parallel, we remain committed towards the Romanian society, involving ourselves in significant social initiatives, through a wide range of projects going from arts and culture to innovation and technology”, said Francois Bloch, CEO of BRD Groupe Societe Generale.

An active engagement in the Romanian society

In addition to financing the local economy, BRD plays an active role in the evolution of the Romanian society as a whole, investing in education & technology, culture, new journalism and sports. BRD’s teams are also engaged in social causes, directly contributing to various education projects.

In culture, BRD supports projects and leaders of a new generation of creators. It stands besides major cultural events, like Sibiu International Theatre Festival or Bucharest National Theatre Festival, classical music concerts, like Sonoro Conac or Stradivarius Tour, but also young projects like Ideo Ideis Festival. It also builds greenfield cultural projects like Scena9.ro – a new cultural journalism platform – or Rezidenta BRD Scena9, a center dedicated to contemporary culture creators.

Moreover, BRD is deploying efforts into preparing the new generation of IT specialists and entrepreneurs to the challenges of tomorrow’s digital society, with the main projects in this area - BRD First Tech Challenge, Robotics Laboratory and Innovation Labs - reaching over 45,000 students.

BRD preliminary financial results for the year ended December 31, 2017 are available to the public and investors on the website of the bank: www.brd.ro beginning with 09h00. Copies of the documents can also be obtained upon request, free of charge, at the head office of BRD Groupe Societe Generale, located at 1-7, Ion Mihalache Bd., 1st district, Bucharest.

(*) Variations at constant foreign exchange rate

(**)Subject to a favourable vote by the Annual General Meeting of Shareholders on April 19th, 2018

BRD - Groupe Societe Generale has 2.33 million active customers and operates a network of 760 units. BRD has a leading position on the card market with approx. 2.3m cards and a network acceptance of approx. 28,800 POS and more than 1,500 ATMs. Total assets of the Bank at 2017 end amounted to RON 53.5bn.

BRD is part of the Societe Generale Group, one of the largest European financial services groups. The group has 145,000 employees in 66 countries and 31 million customers worldwide in its three key activities:

Information provided by IRIS, the news platform of the Bucharest Stock Exchange.

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